EXCLUSIVE-Turkey to Iran gold trade wiped out by new US sanction

* Gold-for-gas trade almost impossible under new sanctions

* Iran restricted to food, medicine purchases with lira

* U.S. measure seeks to restrict Iran oil, gas buyers to
barter

By Asli Kandemir

ISTANBUL, Feb 15 (Reuters) - Tighter U.S. sanctions are
killing off Turkey's gold-for-gas trade with Iran and have
stopped state-owned lender Halkbank from processing other
nations' energy payments to the OPEC oil producer, bankers said
on Friday.

U.S. officials have sought to prevent Turkish gold exports,
which indirectly pay Iran for its natural gas, from providing a
financial lifeline to Tehran, largely frozen out of the global
banking system by Western sanctions over its nuclear programme.

Turkey, Iran's biggest natural gas customer, has been paying
Iran for its imports with Turkish lira, because sanctions
prevent it from paying in dollars or euros.

Iranians then use those lira, held in Halkbank
accounts, to buy gold in Turkey, and couriers carry bullion
worth millions of dollars in hand luggage to Dubai, where it can
be sold for foreign currency or shipped to Iran.

Halkbank had also been processing a portion of India's
payments for Iranian oil.

A provision of U.S. sanctions, made law last summer and
implemnted from Feb. 6, effectively tightens control on sales of
precious metals to Iran and prevents Halkbank from processing
oil payments by other countries back to Tehran, bankers said.

"Halkbank can only accept payments for Turkish oil and gas
purchases and Iran is only allowed to buy food, medicine and
industrial products with that money," one senior Turkish banker
told Reuters.

"The gas for gold trade is very difficult after the second
round of sanctions. Iranians cannot just withdraw the cash and
buy whatever they want. They have to prove what they are buying
... so gold exports will definitely fall," he said.

Trade in Turkish gold bars to Iran via Dubai was already
drying up as banks and dealers declined to buy the bullion to
avoid sanctions risks associated with the trade.

Reuters first reported the boom in Turkish gold sales to
Iran via Dubai last year.

Turkish Economy Minister Zafer Calayan signalled a decline
in the trade last week when he said that, while Turkey would not
be swayed by U.S. pressure to halt gold exports to Iran,
Tehran's demand for the metal was expected to fall.

"You could say that the United States has achieved its aim,"
said a western diplomat. "If Turkey is going to continue energy
imports from Iran, there is no other way to go than trading
sanction-free goods."

NEW ROUTES?

Washington says Tehran is enriching uranium to levels that
could be used in nuclear weapons and has been trying to ratchet
up economic pressure on Tehran. Iran says the programme is for
peaceful purposes.

Turkish ministers had acknowledged the "gold-for-gas" trade
but said it was carried out entirely by the private sector and
was not subject to U.S. sanctions.

Turkey like China, India and Japan is heavily dependent on
imported energy and, while it has cut back on oil from Iran, has
made clear it cannot simply stop buying Iranian oil and gas.

"With so many restrictions, Iran's cash may accumulate in
Halkbank accounts... they may have difficulty getting some of
that money out of Turkey," another senior Turkish banker said.

That could mean Tehran will look elsewhere for allies
willing to try to get round the U.S. sanctions, although it may
struggle to continue to receive gold as a payment method.

"The gold trade may switch to countries that support Iran
politically but Russian banks, for example, would be very
cautious because they are very much in the global banking
system," the second banker said.

"China may be another option. But I can say that the gold
trade is over for Turkey."

Turkey, which is not a major gold producer, was a net gold,
jewellery and precious metals importer in 2011 but swung to
being a net exporter last year. Analysts said Iranian demand had
prompted both the high imports two years ago - which were
largely sold on to Iran - and the surge in exports last year.

Gold exports to Iran rose to $6.5 billion in 2012, more than
ten times the level of 2011, while exports to the United Arab
Emirates - much of it for onward shipment to Iran or conversion
to hard currency - rose to $4.6 billion from $280 million.

Overall Turkish bullion exports fell to 10.5 tonnes in
December from 15.2 tonnes in November.